Bitcoins are accepted by a growing number of merchants, even used to pay some employees

Bitcoin Magazinethis week heralded some exciting news. The popular cryptocurrency that's free of regulation by any nation state has hit a new high of $32 USD/Bitcoin on Mt. Gox, the world's largest exchange. The previous high had been $31.9099 on June 8, 2011.

Right after hitting that previous high, Bitcoin values began a freefall, which we covered in our piece "Digital Black Friday: First Bitcoin "Depression" Hits". It was unclear whether the plunge was due merely to profit taking or other issues. Shortly thereafter, the currency was further devalued when MtGox was hit with a database dump attack and users accounts were compromised due to the service's weak MD5 hashing of passwords. It took the site months to rebuild trust, beef up security, and unwind the trail of fraudulent transfers.

The Bitcoin rollercoaster ride bottomed out at $2 USD/coin in November 2011. And last fall BitFloor -- another major exchange -- was hacked, and $250,000 USD worth of Bitcoins were stolen. But despite that, the currency continued to creep upwards.

Popular social media site Reddit recently gave Bitcoins a boost, by accepting the cryptocurrency as a means of paying for "Gold" premium memberships. LaCie Group SA's (EPA:LAC) "Wuala" and Kim Dotcom's new "Mega" file sharing services both accept Bitcoins as a means of payment.

You don't have to take them seriously, you can stick to serious money like the Dollar, which is now 40% backed by bad mortgages.

If you were an accountant, you would not think verifying past transactions was a waste of time and electricity. Instead of a spreadsheet, bitcoin does it with cryptography and a P2P network. Still the same job, though, making sure all the transactions are correct.

quote: You don't have to take them seriously, you can stick to serious money like the Dollar, which is now 40% backed by bad mortgages.

So you'e saying they (US$) are backed up by something solid for 60% of their value ? Whoa, that's 60% more than what "bitcoins" have for abcking, even if the figure is a tad too optimistic (it's well under 10%, which is still way above 0.00000000000000000000000000% backing of "bitcoins").

It's safe to say that Bitcoin would not be around were it not for its use for black market transactions, primarily the Silk Road web site on Tor. There was some early interest in money laundering, but it's just another tool with limitations in this regard and really too small to handle laundering placement volumes for work of consequence. Bitcoin is way too much of a PITA for any legitimate payment system use unless you are some sort of True Believer ;-)

The limited number of Bitcoins is a feature that is a tribute to the idea of money that doesn't inflate due to fixed supply ( e.g. gold ) and all the magical ideological thinking that comes with it.

It is all working out as the creators mush have intended, the coins they mined two years ago for pennies are now worth dollars, a few parties hold nearly all the bitcoins in existence and are the central bankers of this not-so-decentralized currency.

Outside of the transaction engine itself, the Bitcoin infrastructure is remarkably amateurish and crappy, leaving it rife with hacking issues and fraud.

If small time black marketing and wing nut economic theories turn you on, Bitcoin just may be the place for you. However, if Silk Road is broken by law enforcement, I would expect Bitcoin to be gone, gone, gone.